Last week, we called each and every one of you who had not yet filed your annual reports. We love doing that for you and enjoy catching up on how you are doing! We hope that you got yours filed because if you have not, there is a $400 penalty fee on top of the standard fees.
One gentleman commented to us this week that since he was late, there was really no reason to hurry and do it now. But there is! The first reason is that if you wait till September, the business is made inactive and the reinstatement fee is $600. The second is the tax ramifications of not filing your annual report…
We recently heard the story of a business owner who ‘forgot’ to file her annual report for a few years, but still did her tax returns as an S-Corp. She was audited by the IRS for a completely different reason, but it was discovered that she had not filed the annual reports. This meant her company WAS NOT A CORPORATION!! Those wonderful IRS agents redid all of her tax returns as a sole-proprietor and she was subject to over $50,000 in additional taxes and fees!!
Also, if this business owner had been sued while not legally a corporation, her personal assets would have been at risk. There is no corporate veil for a sole proprietorship. She would have been perceived by the courts in that light all because she didn’t file her annual reports.
So please, take our word for it. If you forgot to file your annual report and still want to be in business, go ahead and pay the $400 fine. It will be worth it in the long run!